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The property tax take in Ireland is below the EU average, and we rely too much on “volatile revenue sources”, the European Commission has warned.

It says Ireland is at “risk of some deviation” from EU budget rules this year and next, and will need “further measures” worth 0.6pc of GDP, or around €1.5bn in the Budget.

In its annual economic recommendations to Ireland, the commission noted property taxes were “one of the most growth-friendly revenue sources” but were worth only 1pc of GDP in Ireland in 2014, compared with an EU average of 1.6pc.

It also recommends that a gradual increase of property tax would prevent massive tax bills falling due when properties are revalued in 2019.
And it notes that the “differences in the taxation of diesel and gasoline for road users are environmentally unjustified”.

The report points to Ireland’s “reliance on highly concentrated and volatile revenue sources”, and advises Ireland to cut tax reliefs and use extra revenue – from the sale of AIB for instance – to pay down the national debt.
The European Commission warned the Government it would need to make a “substantial fiscal effort for 2018”, pressing it to introduce a wider range of taxes and apply them to a broader section of the population.

“Although the economic recovery is robust and output is expected to grow at a solid pace in the years ahead, the outlook has become more uncertain, creating risks for the still fragile public finances,” it said.
Finance Minister Michael Noonan said the recommendations would be “generally followed” but the EU had to take “political background and financial constraints into account”. The Commission refused to speculate on whether Ireland would be granted extra flexibility in EU budget rules to cope with the effects of Brexit.